According to a new study by Strategic Insight, commissioned by the Association of Luxembourg Funds Industry (ALFI) with the support of LuxembourgForFinance, alternative UCITS funds saw a 70% growth in net new flows in 2010 to September, and are on track to finish 2010 with 33 billion net new inflows. This accounts for 15% of total net inflows into all long-term UCITS funds.
Most of these funds represent hedge-style strategies adapted to the growing need for absolute return solutions. New alternative UCITS launched this year have already captured 6 billion.
The study, which considers the changing world for investors as alternative and traditional funds converge, is being released at ALFIs conference on European alternative investment funds in Luxembourg on 24-25th November. It demonstrates that:
– Alternatives are a growing part of the UCITS regulated fund industry products launched after 2007 are capturing nearly 70% of net new flows to hedge type UCITS this year; from 2009 through the present, these newer funds have collected 35 billion of inflows overall. A growing number of these alternative UCITS are run by hedge fund managers, although a substantial proportion are managed by retail oriented, traditionally long-only investment firms that are building their alternative ranges.
– Significant changes in the hedge fund business, especially around regulation and the Alternative Investment Fund Managers‟ (AIFM) directive, are encouraging hedge fund managers to start UCITS funds. Luxembourg domiciled products account for almost half (49%) of total alternative UCITS assets and flows this year, and 45% of the number of funds.
– More hedge fund managers are now participating in the growth of alternative UCITS and catching up to mainstream managers. A greater emphasis on client care is helping in this process.
Fund managers anticipate stronger commitments in 2011 as fund selectors and investors gain comfort with hedge style UCITS, and sustained expansion through the decade, says Jag Alexeyev, head of global research at Strategic Insight.
Camille Thommes, director general of Alfi, adds: The study has ambitious predictions for the growth of the alternative UCITS industry. Indeed, these predictions reflect the interest we are seeing from sophisticated investors for adequately regulated and supervised products, as well as hedge fund managers who were looking to start UCITS funds as a reaction to the uncertainties surrounding the draft AIFM Directive.